TH International (THCH) Q2 2024 earnings summary

Executive summary

• Achieved first-ever positive adjusted corporate EBITDA in Q2 2024, marking a major profitability milestone driven by operational efficiency, cost optimization, and a focus on value-for-money products and fresh food offerings.

• System sales increased 1.6% year-over-year to RMB 403.8 million, despite a 6.6%–10.9% revenue decline from company-owned stores due to strategic pruning of underperformers.

• Registered loyalty club members reached 21.4 million, up 45.4% year-over-year, with average members per store surpassing 23,000.

• Sub-franchisee pipeline exceeded 3,600 applications by end of June, reflecting strong franchise interest and network expansion to 333 stores.

• Secured up to $65 million in financing from founding shareholders, including $50 million in convertible notes and the sale of Popeyes China for $15 million.

Financial highlights

• Adjusted store EBITDA margin reached a record 10.3% in Q2 2024, up from 5.0% year-over-year.

• Total revenues for Q2 2024 were RMB 366.8 million, down 6.9%–10.9% year-over-year, mainly due to underperforming store closures and a 13.8% drop in same-store sales.

• Operating loss narrowed to RMB 54.7 million from RMB 171.5 million in Q2 2023; net loss from continuing operations was RMB 99.5 million, improved from RMB 220.3 million a year ago.

• Digital orders accounted for 86.5% of total orders, up from 80.6% in Q2 2023.

• Cash and equivalents, time deposits, and related party receivables totaled RMB 253.2 million as of June 30, 2024, up from RMB 219.5 million at year-end 2023.

Outlook and guidance

• Focus remains on profitable, capital-efficient growth, expanding the franchise network, and further improving operational efficiency.

• Expecting increased store openings in Q3 and especially Q4, with momentum in individual franchising and make-to-order renovations to drive incremental food revenue.

• Near-term priorities include optimizing cost structure, delivering sustainable revenue growth, and expanding store-level profitability.